Square Co-Founder Jim Mckelvey: Crowdfunding gets more people thinking like entrepreneurs!

By Jordan M.

Jim Mckelvey is the co-founder of Square, a mobile payment-processing platform based in San Francisco, founder of SixThirty, a Financial Technology startup accelerator based in St. Louis, and General Partner at Cultivation Capital, an early stage venture capital firm based in St. Louis. AlumVest had the opportunity to interview Jim and asked him a few questions about his personal inspiration, Crowdfunding, and his entrepreneurial insights on where the opportunities are.

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Q - Who were some of your biggest inspirations in becoming an entrepreneur, and why?

A - Nikola Tesla - a great genius who went up against Thomas Edison and won.

Q - You founded Square along with Jack Dorsey in2009. What are some things that entrepreneurs should consider when choosing a business partner?

A - Complementary skill sets and someone whom you trust.

Q - What is a problem that you see that may prevent students from creating successful companies, and what could be a potential solution to that problem? Specifically, what can universities and alumni do to help grow entrepreneurship on campus?

A - I think most people over-think entrepreneurship. Just solve a problem and don’t worry too much if the idea is going to have worldwide appeal. Universities can provide a supportive environment (which they already do) and alumni can provide mentorship.

Q - What challenges do you face in building SixThirty as a leading FinTech accelerator? What qualities do you look for when evaluating the potential success of a startup in this space?

A - SixThirty’s main issue is choosing companies that are solving problems that will be significant in the future. We therefore have to continually remember that what works today is not necessarily the best for tomorrow.

Q - What is your view on crowdfunding and its impact on startup finance?

A - I think crowd funding is great, mainly because it gets more people thinking

like entrepreneurs. The more we all become problem-solvers, the fewer problems we will have.

Q - What is one piece of advice you would give to student entrepreneurs who have ideas for companies?

A - Solve a problem. Opportunity will follow.

Before You Reach Out: Know Your Investor’s Interests and Concerns

By Duan L.

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For many early stage startups, resources from wise investors are crucial for them to take off and grow. Given this fact, many entrepreneurs are always concerned about who could be their potential Backers, where they could be found, and how to attract their attention more effectively.

This May, AlumVest did a survey about crowd-investors’ top concerns and interests among 80 corporate executives who are between 30 to 42 years old with master degrees and annual income of $100k or greater. The survey discovers the demography, investing interests, and concerns of some active investors. Another survey “Crowdfunding Benchmark Study”* also get some similar results from 480 completed online surveys.

Here are some highlights from these surveys:

  • The core investors are in the upper middle-income and above income brackets, middle-aged and college educated individuals;
  • 58% of all respondents indicated high interest in early stage equity investments;
  • 61% of the investors would like to invest in 1-2 startups annually;
  • What concern investors the most: Management/Fraud, Business Planning and Investment Return
  • A 3rd party’s review of Startup’s management team can increase investor’s investment intent by four times.

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(Investment Amount Per Project)

These numbers give entrepreneurs a more vivid image of what would their potential Backers look like and what they are concerned about. Most importantly, entrepreneurs can also be assured that respondent investors have all shown a strong interest in investing in early stage startups.

As more entrepreneurs are now seeking funds from the Internet, AlumVest also gathered some additional feedback from investors who are considering using online crowdfunding platforms:

  • What investors are looking for from a startup portfolio: Quality of the Startup/ Credibility/ Valuation/ Liquidity Concerns
  • Where do investors currently find startup investment opportunities: Referrals(excludes portfolio company referrals)/ Angel groups/ Accelerators
  • Among the respondents, 40% of them (those with an annual income >$100k) would invest $20,001 – $50,000 per investment; 20% of them would like to invest $100,001 + per investment

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From our feedbacks, we can see that Credibility is a key factor that most of the investors care about the most when they are using online platforms. Because of this, they would look into more details about company’s portfolio and care more about the community that startup is associated with.

I am glad to say that the accredited community AlumVest provides for our entrepreneurs and investors addresses the credibility issue effectively. Leveraging the pre-vetted school networks and alumni connections, investors can easily find someone who knows the founders of a startup to conduct further due diligence; additionally knowing who is currently investing in this startup also makes investors more comfortable to invest or co invest with another investor from the same school. Entrepreneurs would also have more chances to seek the most suitable investors for their startups and get extra assistance and mentorship besides funds. AlumVest believes that more opportunities would be found and created within our mutual benefit community! Join us and start up!

*The Crowdfunding Benchmark Study was conducted by EarlyIQ, the Crowdfunding Professional Association and Crowdfound Capital Advisors.

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SEC LIFTS BAN ON GENERAL SOLICITATION; IMPACT ON STARTUPS’ FUNDRAISING

By Michael S.

No Soliciting

The Securities and Exchange Commission (the “SEC”) took a major step last month in their ongoing interpretation of the different segments of the Jumpstart Our Business Startups (JOBS) Act. By adopting Rule 506(c), the SEC permitted general solicitation and general advertising in private securities offerings (direct solicitation of accredited investors). Effectively, this now allows startups to market to investors in the open market as long as the startups abide by certain new rules.

JOBS Act

Companies privately placing securities in offerings conducted pursuant to Rule 506 and Rule 144A under the Securities Act of 1933 have historically been prohibited from using general solicitation or general advertising to market their securities in offerings conducted under those rules. These changes are a welcome step forward for the SEC regarding the JOBS Act. Rule 506(c) will become effective on September 23, 2013.

We at AlumVest are very excited to see this rule implemented as it shows that the SEC is finally making progress with the rulemaking under the JOBS Act. We also, however, remain cautious that the new rules may place overly burdensome requirements on startups, especially if the proposed related changes to Form D (as discussed below) are adopted.

Your Add Here

While startups may get a great urge to shout from rooftops or advertise on TV or radio or place advertisings directly on their products to announce that they are fundraising, the general advertising approach may not work for all startups in light of the limited pool of accredited investors that maybe the recipient of such calls to fund.

Of importance is the new requirement that the startups raising the funds are responsible for taking reasonable steps to verify that all investors are accredited investors. The determination of the reasonableness of the steps taken to verify an accredited investor is an objective assessment by a startup. It was great to see the SEC respond to many commenters’ requests by providing a non-exclusive list of methods that startups may use to satisfy the verification requirement for individual investors, such as:

  • Reviewing copies of any IRS form that reports the income of the investor and obtaining a written representation that the investor will likely continue to earn the necessary income in the current year.
  • Receiving a written confirmation from a registered broker-dealer, licensed attorney, or CPA that such entity or person has taken reasonable steps to verify the investor’s accredited status.

What may serve as the ultimate determining factor on the practical use of the new general solicitation rules are the SEC’s related proposed changes to Regulation D and Form D. So what do these proposed changes actually require? In particular, the startups:

  • Will need to file an “advanced” Form D with the SEC more than 15 days prior to engaging in general solicitation. Using a real world example, a startup that wants to participate in a public investor presentation or a an accelerator demo day in March, will need to start working with its advisers in February to be sure to make the deadline;
  • Will be required to submit to the SEC all written general solicitation materials before their use;
  • Will be required to add considerably more information to the Form D than previously included; and
  • Will need to file a closing Form D no later than 30 days after

Failure to comply with these proposed rules will impose a draconian penalty by disallowing a startup from making a Rule 506 offering of any sort for 1 year after the date of the infraction.

We at AlumVest are very excited by these developments as it seems that the SEC is finally making progress with the rulemaking under the JOBS Act. We continue to eagerly await for the eventual release of rules to Title III of the JOBS Act, allowing the democratization of equity-based crowdfunding to anyone who wants to invest in a startup of their choice.

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Start-ups: Female Leaders’ New Field

 

By Duan LImage

 

“Women are key to America’s prosperity,” claimed Warren Buffet in his article for Fortune Magazine this May. As he said, women’s power in business is underestimated, and investment in women can benefit both investors for getting better returns and business for becoming more productive.

 

Recently, more and more research results show that this oracle in investment is correct again—women do have positive effects in business!  In “Women at the Wheel: Do Female Executives Drive Start-up Success?” a study conducted by Dow Jones, researchers came to the conclusion that “the odds of success increase by 2% and 0.7%, respectively, for a 10% increase in C-level female executives and board members.” For start-ups with five or more females, 61% were successful and only 39% failed.   

 

The first key reason why women entrepreneurs have outperformed in business is that women generally spend more time on research and tend to take less risk than men. So, they would respond to different chances and challenges by safe and comprehensive plans, thus leading the company to a more stable growth. According to Credit Suisse study, net income growth for companies with female directors is 4% higher than those with only male directors.

 

The second reason is that “a heterogeneous management team” might perform better, according to Bloomberg’s report about female entrepreneurs. As Michelle Lamb, an author of a related study, said in a report, diverse corporate boards exercise more diligent oversight, have better attendance records, and invest more effort in auditing. Eventually, a heterogeneous team would reduce risky investment moves and increase return on equity.

 

Overall, female entrepreneurs play an important role in increasing companies’ outputs, and VCs that back women generally got better returns than those that don’t. Even though women entrepreneurs still have a long way to go before they become an active part in the business ecosystem, the increasing attention from investors and VCs would definitely make their way easier than before. We at AlumVest are also glad to support these diligent and outstanding women to achieve their entrepreneurial dream!  

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Happy July 4th! Chasing and Celebrating the American Dream!

Asians-on-America

On July 4, 1776, the United States declared its independence and started creating its own story on this new continent. Undoubtedly, America’s innate passion and courage of exploring, innovating and creating played a crucial role in changing this nation into the land of opportunity for startups and entrepreneurs. America’s story has been shaped in large part by passionate and driven entrepreneurs who have, against all odds, chased their dreams and created innovative products or services that have changed the world!

While we are celebrating July 4th with fireworks and barbecues, the entire AlumVest team wants to give a big Thank You to all the entrepreneurs, investors and supporters out there for making America such an amazing place to discover and start your passion, where the results are only limited by one’s imagination! Here is to Startup America!

Happy July 4th!

The AlumVest Team

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Bravo! North Carolina is a step closer to equity crowdfunding.

By Duan L

North Carolina State Legislative Building

North Carolina State Legislative Building (Photo credit: Wikipedia)

On June 20, 2013, North Carolina moved a step further to promote small business capital fundraising when the North Carolina House passed its own intra-state investment crowdfunding exemption (House Bill 680) instead of waiting for SEC to finalize its regulations for the JOBS Act. As crowdfunding is an important means of stimulating the job market and growth of the economy, it is not surprising that North Carolina decided to join other states and adopt its own crowdfunding bill within the JOBS Act’s framework. The bill now moves to the state senate.

The new bill aims to make crowdfunding easier for both issuers and investors. It includes the most investor friendly provisions from the JOBS Act and other states’ legislation, yet provides for ample investor protection. Some of the most salient provisions of the new bill are the following:

  • The issuer must be a North Carolina business.
  • The investor must be a North Carolina resident.
  • Unaccredited investors will be able to invest up to $2,000 per issuer.
  • Issuers will be able to raise up to $1 million without audited financials or $2 million with audited financials, in any 12-month period.
  • Issuers are permitted to promote the offering publicly, after filing notice with the state securities regulatory agency.
  • The exemption is set to become effective immediately when passed in the Senate.

Even though the SEC has been telling the public that it would release the crowdfunding rules as soon as they can, some states cannot wait for that long. When the bill becomes law in the Senate, North Carolina will be the third state after Kansas and Georgia that has its own legal crowdfunding provisions. Washington and California are working on passing intra-state crowdfunding regulations as well.

It is very exciting to see these states’ efforts to push forward the regulations stimulating the investments in small business and flow of capital. Considering crowdfunding as a powerful tool for early-stage startup fundraising, we at AlumVest are looking forward to offering equity crowdfunding platforms to students’ startups and cooperating with alumni communities in North Carolina in the near future—to continue turning our “alumni effect” into reality!

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Why Your Funding Campaign Should Include a Video. Making Your Campaign Video.

By Sonia D. and Sasha A.

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Why Would Your Campaign Benefit From a Video?

If a picture is worth a thousand words, a video could very well be worth a thousand sales. What matters most to the funding campaign? Contributions.  If you’re like most people, the first thing you do when visiting a funding campaign page is click the play button. A video is by far the best way to get to know the campaign, the startup and its products or services, as well as the emotions, motivations and character of its founders team. A video is a good indicator of potential success and a demonstration of the efforts the team has put in their campaign.

Consider these statistics:

  • A study done by Econsultancy concluded that visitors who viewed product videos were 97% more likely to buy your product after watching a video of it than visitors who did not.
  • Video now appears in 70% of the top 100 search results listings.
  • Crowdfunding statistics have shown that campaigns with a video have a much higher success rate of 50% vs. 30% than those who don’t. Perhaps even more important is that funding campaign profiles with a video raise more funds
  • Finally, to drive the point home, Retail Touchpoints found that shoppers who viewed videos were 174% more likely to purchase than viewers who did not.

This is one marketing force you can’t afford to ignore!

While having a video is not required to launch a Funding Campaign on AlumVest, we highly recommend that your campaign include a video. Please read on below for how you can create a compelling video, the methods available to you and how AlumVest can help.

Making Your Funding Campaign Video

We know that making a video can be intimidating; it sounds like a lengthy and expensive process and many of us don’t like being in front of a camera. But we also know that making a video is a challenge worth taking on. It says you are passionate about what you’re doing enough to create an elegant and effective way of presenting yourself, your company, and your products or services. It’s an effort worth the potential big reward. Don’t be intimidated, we’re here to help!

How to Make Viral Marketing Videos

Regardless how creative and fun your funding campaign video is and whether it is professional or bare-bones, you’ll want to consider the following details:

  • Is this a video for your company or for the funding campaign pitch? — This is always a strategic choice depending on how compelling your idea and your campaign profile are. For some videos, we found that the founders who enthusiastically explain their company and idea without a direct campaign pitch do an outstanding job of speaking to the viewer and get them to share their passion in order to contribute to the funding campaign. In a way, a video becomes the startup’s digital business card that can be easily shared, seen and understood. Other videos need to tell a more personal story behind your specific funding campaign and why you need the funds. Where’d you get the idea? What stage is it at now? How are you feeling about it?
    • This decision will need to be made depending on the type of product or service you are providing and the quality and ease with which the viewer can relate to your company by reading your campaign profile. For example, funding campaign videos about great consumer products usually speak for themselves. On the other hand, if you are trying to explain the potential market for your new product or service that may not be initially well understood, it will help to highlight the startup and its team and the qualities that they possess that will help you succeed.
    • Videos with segments that can be substituted one for another can accomplish both purposes — an effective pitch for your company and a direct and engaging story of your funding campaign.

·       Professional Video vs. Getting Personal — Depending on the choice you make of whether to make a video “digital business card” of your company or putting a more personal touch on it (self-explaining your company and campaign), there are a few options to choose from:

o   If you decide to make a professional video for your company, there are a ton of great video companies out there that would do a great job helping you put together your company video. AlumVest has partnered with an awesome company that can help you create a professional compelling video within your budget. Plus you’ll benefit from our connections by getting the AlumVest discount.

o   Most “personal touch” videos show the founder telling their startup’s story straight into the camera. You can spend days shooting and editing, or you can just knock it out with a few friends during the day. It doesn’t have to be flawless; it just has to be you.

o   Don’t be afraid to put your face in front of the camera and let people see who they’re supporting. You’d be surprised what a difference this engagement makes.

·       Tell the Viewers Who You Are — A good funding campaign video includes a brief and to-the-point description of your business, business plan and market. Remember to make your video viewer friendly and easy to understand.

·       Be Clear, Direct and Engaging — A good video is a great opportunity to capture the viewer’s attention. Whether it’s funny or evocative, you need to move people and get them to love your idea, passion, solution or vision.  Viewers tend not to remember blah or merely factual stuff.

·       Keep It Short — For most companies, this means 1-2 minutes at most.  For something that may be a bit more complex, the videos may be a bit longer.

·       Hook Them Early and Often — You have 2-7 seconds before viewers click away; every 11 seconds you need to keep their attention.  Viewers don’t have time to hear your life story and won’t care until after you have gotten them interested in your solution to their problem first.  Make them laugh out or even annoy them and they are more likely to keep watching and send it on. 

·       Give Viewers Clickable Moments — Identify triggers that will make the targeted audience click on your links, your rewards and that all important “Fund This Campaign” button. 

·       Be Sincere — Have an honest and believable story as the backdrop. If a viewer even for a moment would believe that you are being insincere, that would be enough for people to leave your video and get no traction.  Be real.

·       Ask People for Support — Come out and ask for people’s support, explaining why you need it and what you’ll do with their money.

·       Consider Talking About Your Team and Rewards — Talk about how awesome your team and rewards are, using any images you can. Talk about your schools and background (concisely!). Team and rewards information are especially applicable for a Funding Campaign video pitch.

·       Be Embeddable — In order for the video to be truly viral, make it portable. Allow easy embeds, downloads comments and URL shorteners (e.g. bit.ly) to create social media-friendly links.

·       Remember the Little Things — Don’t put any copyrighted music in your video without permission from the author! There are many music resources you can use: SoundCloud, Vimeo Music Store, Free Music Archive, and ccMixter. And finally a few technical specs: videos must be 1000MB or less and have a file type of MOV, MPEG, AVI, MP4, 3GP, WMV, or FLV.

·       Thank the Viewers!

The audience craves great content and to be engaged and influenced. So have fun with the videos and your viewers will thank you with their sharing, contributions and thumbs up.

Based on our experience, cool videos that speak to and engage the audience, lead to funded campaigns, greater product/service adoption or sales and occasionally exits.  Please feel free to reach out to our team members, Lynn at lynn@alumvest.com or Sasha at sasha@alumvest.com, with any questions, suggestions or for our voiceover skills! (just kidding on that last part).

TIP #7: ORGANIZE YOUR CAMPAIGN INTO LEVELS OF SUPPORTERS

By Sonia D. and Sasha A.

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Organize your campaign into levels of supporters.  Have a prioritized list of where you want to source your capital into A, B and C.  Your A’s are your supporters that you know you can count on – this is your inner circle of friends, family and co-founders.  Your B’s are your extended circle of friends, friends of your co-founders, acquaintances, friends of friends, current and former colleagues, LinkedIn, Facebook and Twitter connections, business contacts and other people with whom you have a connection.  Your C’s are everyone else you have to reach out to and rally to be your supporters.  This is where the power of a good fundraising campaign coupled with strong social media presence comes in.  If you can raise at least 25% of your funding goal from your A list, chances are good that the B’s and C’s will bridge the gap for the rest.

TIP #6: GIVE YOUR FUNDRAISERS A HAND

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By Sonia D. and Sasha A.

Give your fundraisers a hand!  Write out social media communications for them to use when networking your project.  Your fundraisers are your supporters, so make it easy for them share your campaign with their contacts.  Writing out emails and social media messages that your supporters can use lets them seamlessly and effectively spread the word to grow your campaign organically.

       If you are spreading the word via emails or social media, make sure to include a prominent link to your campaign in the body of the message that can give anyone direct access to your campaign.

       Every time a supporter backs a campaign on AlumVest (www.alumvest.com), he or she will immediately get a message on the screen encouraging them to spread the word about the campaign they just backed. Encourage your backers to take advantage of this function.

We all love learning about cool new companies and ideas, so help make it an easy process!

HKD $1 Million Entrepreneurship Competition from Hong Kong University of Science & Technology (HKUST) 2013 is open to AlumVest startups and entrepreneurs

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Apply: send two page executive summary to lynn@alumvest.com

              Entry Deadline: 12pm, February 25, 2013 

 

AlumVest is pleased to announce that we are partnering with HKUST on HKUST’s $1 Million Entrepreneurship Competition which looks for emerging entrepreneurs and startups. While there is no specific area that the Competition is targeting, companies in the areas such as nanotechnology, information technology, renewable energy, environment, health, financial services, logistics and social entrepreneurship are especially encouraged to apply. 

 

The Competition is open to:

·         entrepreneurs and teams from local, mainland and international schools, with

·         teams that have at least one HKUST member in their organization, and

·         the business proposals should have a primary focus of starting an innovative business in the Hong Kong region.

 

As a special offer, HKUST will also offer to match any interested startups and entrepreneurs with full and part-time students, as well as alumni, faculty and staff from all academic departments within HKUST to satisfy the HKUST affiliation requirement. 

 

Applicants who might need support in finalizing their business ideas can also receive support from HKUST’s mentor pool to which AlumVest can arrange an introduction.

 

Winner of the Competition will be awarded a package of worth over HKD $1 Million composed of cash and in-kind contributions. Interested teams should submit their business Executive Summary in English to lynn@alumvest.com.  AlumVest will follow-up with the qualified candidates to submit their application by February 25, 2013 deadline. 

 

We look forward to your participation and working with you.

 

The AlumVest team

 

 

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